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Traditional vs. Automated: When Applying for a Mortgage, which is the Way to Go?

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Applying for a mortgage can be exciting, nerve-wracking, and confusing. It’s wonderful to look forward to a new home, but purchasing a house and getting a mortgage are huge financial responsibilities, and often the biggest financial decision any person will make in their lifetime. Plus, with all the required documents and rates that change daily, it’s easy to get lost in the mortgage-mumbo-jumbo. With that being said, is it better to go the completely traditional route when applying for a mortgage, or is it easier to work with a completely automated, online platform? Let’s take a minute and explore the pros and cons of each.

Traditional Route: If it’s Not Broke, Why Fix It?

Traditionally, if you wanted to apply for a mortgage, you would contact a mortgage loan officer, lender, or broker, either in person at a bank or other lending institution, or over the phone. They would answer any questions you have and help you with your application. Once you fill out your application and send it back to them (either in person, or through mail, the internet, or fax), you will receive a loan estimate and some other disclosures that you will need to review before choosing a lender and loan type. Your loan officer can also help answer your questions here. Once you decide to proceed, you will need to provide supporting documentation. This might include bank statements, pay stubs, tax returns, and more. You will also be required to purchase and show proof of homeowner’s insurance, and your lender might require an appraisal. Eventually, but no less than 10 days before closing, you should lock your rate. Finally, you’ll need to pay for your down payment and closing (this is normally a wire transfer or cashier’s check). Then you can close on your new house.

Usually, people who aren’t as confident with technology prefer the traditional method, but it’s important to note that even if you’re feeling unsure, you can contact an online lender and they will offer as much handholding as necessary to help you with their automated platform. However, by their very nature, automated platforms are designed to be easy-to-use and intuitive. Another thing to keep in mind is if you have a unique situation, such as if you’re self-employed, have irregular income, or have a poor credit score, you may need to talk to a loan officer regardless of whether or not you apply traditionally or online.

Online and Automated: The New Way to Mortgage

In many ways, applying for a mortgage completely online and using an automated platform is very similar to doing it the traditional way. The only difference is you might never speak to a loan officer or salesperson. Most mortgage applications can be filled out online, and you can receive the required loan estimate and disclosures electronically. Supporting documentation can also be submitted online. You can view rates, request a rate lock, and manage your mortgage app almost anywhere where you can access the internet.

Automated platforms are great because applicants often get results faster than they would using the traditional method, documents are easily and securely stored (and, in some cases, can be obtained directly from your bank or employer, saving you the hassle of trying to find them yourself). Lenders who use automated platforms usually can also save their consumers a bit of money, by not having salespeople who need to be paid commissions and also having less (or no) brick-and-mortar expenses for physical branch locations. Borrowers may see these savings by having less fees. And with online access, people with busy schedules can often manage their mortgage app in their own time, whenever works for them, as long as they have internet access. If you do want to contact a loan officer, they will be more than happy to help, but if you don’t like talking on the phone or in person, chances are that, for you, automated is the way to go!

Choosing a lender is a big decision, but how do traditional versus automated applications compare? Let’s take a look!

Gathering Information

So, you’re starting the mortgage process. Maybe you have some questions, maybe you’re not sure who you want to work with, maybe you want to get pre-approved or pre-qualified. Which route should you go with?

Traditional Automated
As you’re considering banks and mortgage lenders, you’ll usually talk to a loan officer in person or over the phone. You may need to pay attention to hours of operation and make sure that you can meet with your loan officer in a way that fits your schedule. Automated platforms can be accessed 24/7 wherever there is internet. Most have a chat bot or an extensive FAQ page to help borrowers help themselves, but every automated platform you find will have access to real customer support as well, whether that’s through chat, email, or phone. You can try the automated platforms of several different lenders and decide which lender and loan is right for you before committing to one.

Application

When it’s time to apply, how do the application styles differ?

Traditional Automated
When you apply to a traditional lender, chances are you will see something similar to a Uniform Residential Loan Application. Your loan officer or lender can help you with your app, but you will need to provide your information (and the information of any co-borrowers), the property and loan type you’re looking for, information about your current and past employment, your income and housing expenses, your assets and liabilities, and some additional information. Even if the lender you’re working with doesn’t have a completely automated process, most will allow you to work on your loan application online. If not, however, you will need to make sure you have this information when meeting with your loan officer. As your application and mortgage get processed, you may need to call or meet with your loan officer, underwriter, or processor continuously to answer questions or provide additional information. Automated platforms often allow you to save your progress and continue on your own time. This allows you to work at your own pace and come back later if you need to double check anything. Further, many automated platforms allow you to pull certain information automatically, such as bank and asset information directly from your bank. Because of the security measures that lenders use, this process is safe and secure, and often faster and more accurate than pulling and inputting this information manually. You can provide additional information as required by the officer assigned to your application, even if you never actually speak with them. Requesting a rate lock is also normally a very simple matter that can be handled online.

Closing

Closing is an exciting time! Is there anything different between a traditional closing and an automated closing?

Whether you choose to apply traditionally or on an automated platform, as the buyer, you will have to review your closing documents, prepare the payment of any down payment, closing costs, or other expenses, and be able to offer proof of insurance. While the process varies slightly by state, most likely, you will meet with an attorney or agent to sign the closing documents.

Traditional Automated
Three days before closing, you will receive a Closing Disclosure. This should be reviewed carefully so you can let your loan officer know if you have any questions or concerns. You will also receive a closing disclosure online three days before closing. If anything looks incorrect or if you have any questions, you will be able to reach out to customer support for help.

Who Offers Automated?

Ready to start looking at lenders? Many great banks and financial institutions will help you through the traditional route. The automated process, however, is still relatively new. If you’re interested in pursuing an automated option, you can check out Rocket Mortgage, Better.com, or Figure, for example!

Which lender is right for you? Check out our lender profiles and compare mortgage rates!

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